Escopeta Reports Massive Gas Discovery in Cook Inlet, Alaska

Escopeta Oil Company LLC, a Houston-based independent, has discovered what it estimates to be 3.5 trillion cubic feet (99 billion cubic metres) of natural gas at a prospect in southern Alaska’s Cook Inlet, a company official said on Saturday.

The estimate is based on results of a single well and represents in-place reserves, not recoverable reserves, said Bruce Webb, a company vice president in Alaska. “Usually the recoverable reserves are somewhere in the neighborhood of 50 to 80 percent of gas in place,” he said.

The discovery, at the offshore Kitchen Lights unit, appears to be the biggest in 25 years in Cook Inlet, said Escopeta, which is privately held. The basin is Alaska’s oldest producing oil and gas region, with production dating back to the 1950s, and it supplies natural gas mostly to regional markets in and around Anchorage.

Webb said Escopeta plans further exploration drilling, through at least 2014, and will also test deeper oil-prone levels.

Escopeta’s well was drilled from a jack-up rig that the company shipped to Alaska on a foreign-flagged vessel, in violation of federal maritime law. Escopeta had hoped to win a Jones Act waiver from the U.S. Department of Homeland Security while the rig was in transit, but that did not materialize, Webb said.

For its Jones Act violation, Escopeta faces a $15 million fine assessed last month by the Department of Homeland Security, he said. “We rolled the dice and took the chance. It didn’t work out. So now we’re subject to the penalty,” he said.

The company hopes to convince the department to reduce the fine, he said.

By Yereth Rosen (Reuters)

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Source: Reuters, November 6, 2011; Image: Escopeta Oil Company LLC